November 14 - November 18

Is Europe controlling our stock market? Monday’s tape was totally different than I have seen. The market appeared to be very tired with no resiliency what so ever. We did not have extensive minus tick, but probably more importantly was the fact that positive tick of any magnitude was non-existence. We did not receive institutional monies to purchase stocks. It was indeed a day where the bulls were comatose. On a positive note, the advisory trade profited for 3 S&P points. The bonds saw a midday rally that kept persisting to push to the highs at just above 142. Then the afternoon had a pullback that did not correlate the stock prices. Stock prices actually made a lower low, but bond prices did not make a higher high. A divergence is starting to develop, as asset allocation broke apart. Fear was the primary initiator of Tuesday’s market as it sold down to 1234 in the very early morning once again on European economic fears. The financial columnist was writing about the problems escalating in Europe as the primary source of international intrigue. Do not underestimate what a bull can do! The bonds once again fell short of the 143 cement ceiling. They did journey higher, but as the day progressed they grudgingly gave up their gains and turned into the red. I wonder if European fear is prompting the bonds to maintain above 139 or is the Federal Reserve the main source? Wednesday’s session had numerous trend programs, whereby the market would swing upwards or downwards in a continuous pattern several times. This type of trading is definitely computer controlled. Having said this, the mercies of trading are going to generate sell stops and buy stops, which provides the movement. We did not generate a minus 1200 tick. Apparently, the sell programs did not have institutional selling. Stay tuned for updates on intermediate trading in the daily advisory. It appeared by the tape watching that a bidder was holding the bonds. Thursday should be marked in your diary as an incredible day. I cannot recall a day where there have been 5 instances of minus 1500 tick. As noteworthy as this is, we still have not seen a reasonable bounce. This has placed a short-term market into an oversold condition. The bonds are now very overbought but they have penetrated the resistance area of 143 ¼ to journey to 143 ’21. This is putting the bonds at a point whereby if any better than expected news would be released from Europe, the flight to safety could end very abruptly. Expiration day occurred Friday. It was slower with less volatility then we have seen during the other days of this week. There was not severe tick. The net change revolved around zero. The bond manipulators seem to have lost their grasp lately. Several times we have seen sell offs that have carried bonds toward the 142 price area. Next week will be the Thanksgiving holiday week, which generally has a different tone.